WHY WOULD IT BE USEFUL TO EXAMINE A COUNTRY’S BALANCE-OF-PAYMENTS DATA?

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WHY WOULD IT BE USEFUL TO EXAMINE A COUNTRY’S BALANCE-OF-PAYMENTS DATA?

Session 
CPA – Questions CPA – Mini-Cases - TBA

Week 1 
Sep 9 None Assigned: 
After reading the chapter’s description of Trident’s globalization process, how would you explain the distinctions between international, multinational, and global companies?

Week 2 
Sep 16 
Why would it be useful to examine a country’s balance-of-payments data?

The public corporation is owned by multitude of shareholders but managed by professional managers. Managers can take self-interested actions at the expense of shareholders. Discuss the conditions under which the so-called agency problem arises. 
Luxury wars: LVMH vs Hermes p. 98~102

Week 3 
Sep 23 What are the three major functions of the foreign exchange market? 
Define and give an example of a direct quote between the U.S. dollar and the Mexican peso, where the United States is designated as the home country.

A direct quote is the price of a foreign currency in domestic (home) currency units. An example, using Mexico and the United States (home country) is: $0.1050/Peso. 
Discuss the implications of the deviations from purchasing power parity for countries’ competitive positions in the world market. 
Mrs. Watanabe and The Japanese Yen Carry Trade p. 157~159

Week 4 
Sep 30 You read that exchange-traded American call options on pounds sterling having a strike price of 1.460 and a maturity of next March are now quoted at 3.67. What does this mean if you are a potential buyer?

What happens to the premium you paid for the above option in the event you decide to let the option expire unexercised? What happens to this amount in the event you do decide to exercise the option?

Week 5 
Oct 7 The emerging market crises of 1997–2002 were worsened because of rampant speculation. Do speculators cause such a crisis or do they simply respond to market signals of weakness? How can a government manage foreign exchange speculation?

What were the main causes of Thailand’s crisis of 1997? What lessons were learned and what steps were eventually taken to normalize Thailand’s economy? Banbury Impex (India) p. 240~244

Week 6 
Oct 14 None Assigned

Week 7 
Oct 21 
What are the four main types of transactions from which transaction exposure arises?

Ultimately, a treasurer must choose among alternative strategies to manage transaction exposure. Explain the two main decision criteria that must be used.

What is the central problem involved in consolidating the financial statements of a foreign subsidiary?

Week 8 
Oct 28 
The objective of both operating and transaction exposure management is to anticipate and influence the effect of unexpected changes in exchange rates on a firm’s future cash flows. What strategic alternative policies exist to enable management to manage these exposures?

An alternative arrangement for managing operating exposure between firms with a continuing buyer-supplier relationship is risk sharing. Explain how risk sharing works. Toyota’s European Operating Exposure p. 285~287

Week 9 
Nov 4 
What is the effect of market liquidity and segmentation on a firm’s cost of capital?

The riddle is an attempt to explain under what conditions an MNE would have a higher or lower debt ratio and beta than its domestic counterpart. Explain and diagram what these conditions are.

Week 11 
Nov 18 You are an investment banker advising a Eurobank about a new international bond offering it is considering. The proceeds are to be used to fund Eurodollar loans to bank clients. What type of bond instrument would you recommend that the bank consider issuing? Why?

Discuss any benefits for a company to (a) cross-list its equity shares on more than one national exchange, and (b) source new equity capital from foreign investors as well as domestic investors. 
Petrobras of Brazil and the Cost of Capital p. 343~346

Week 12 
Nov 25 List the steps involved in the export of lumber from Portland, Oregon, to Yokohama, Japan, using a confirmed letter of credit, payment to be made in 120 days. 
What are the advantages and disadvantages of serving a foreign market through a greenfield foreign direct investment compared to an acquisition of a local firm in the target market? Corporate Competition from the Emerging Markets p. 426~427

Week 13

Dec 2 None assigned

Week 14

Dec 9 Should the anticipated internal rate of return (IRR) for a proposed foreign project be compared to a) alternative home country proposals, b) returns earned by local companies in the same industry and/or risk class, or c) both? Justify your answer.

How is foreign exchange risk sensitivity factored into the capital budgeting analysis of a foreign project?